Qantas heading towards bluer skies

Qantas is turning around the decline in yields - or average air fares - after they bottomed out last year, but it is still experiencing weakness in earnings from its international flights.

The airline's monthly traffic figures show that total domestic yields for Qantas and Jetstar for the first seven months of this financial year were 6 per cent lower than in the same period the year before.

Total international yields for the group were 20 per cent lower.

But the latest figures show the decline in yields of almost 8 per cent from international operations in January was an improvement on what was reported in December and November.

"It's nearer to home that they are benefiting, but clearly the international business hasn't turned to the same degree,'' an industry insider said.

''It's going to take some time to get the yields back to where they were two years ago.''

The revenue seat factor - a measure of seats occupied by paying passengers - for Qantas and Jetstar fell by 0.6 percentage points to 81.2 per cent in January.

Qantas international operations have been worst affected by the decline in demand for travel.

Its key routes to the US, Europe and New Zealand have suffered from too many flights relative to demand, notably from the Middle Eastern airlines boosting or at least maintaining the number of services.

In an indication the competition shows no sign of easing, Virgin Blue's long-haul offshoot, V Australia, will begin direct flights from Melbourne to Johannesburg on Saturday.

The improvement in yields led to a 7¢ rise in Qantas shares to A$2.84 ($3.79) yesterday, helping the stock recover most of the losses of last month when management issued worse than expected earnings guidance.

Virgin Blue's share price also closed up 2¢ at an 18-month high of 76¢. The stock has risen 21 per cent since the airline announced last week that John Borghetti, a 36-year veteran of Qantas, would take over as chief executive from co-founder Brett Godfrey in May.

Cathay Pacific gave the sector some optimism yesterday with a profit of $HK4.7 billion ($866 million) for the full year, compared with a loss of $HK8.7 billion previously.

- © Fairfax NZ News